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City-Funded Programs

Some people ask why the City Healthplan is not a typical insurance program.

City governments set up these city-at-risk programs (not insured) to break out processing and cost-control fees into separate categories from claims.

This separation of fees sharpens negotiations with Blue Cross but adds risk. The payments from the City to Blue Cross go up or down, depending on the claims to be paid in a given month.

Cost-control fees can be reduced or dropped altogether. During initial contract negotiation, this lets a city negotiate the fees in a bidding negotiation between Blue Cross and United Healthcare.

There is a potential trap. Administrators do not give away services. Say an administrator drops its fees from $80 per month per employee to $40 per month.

Is that administrator providing the same level of service for $40 that it was planning to provide for $80?

If not, is it skimping on cost-control services? If so, then the plan could end up costing more, rather than less, because there is no one-on-one oversight with a case manager.

That's where the potential savings comes in. More directed case management helps the patient get better sooner, and saves money.

It's kind of like "pay me less at set-up" and "pay me much more later." We need to deal with this issue.


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Healthcare Benefits - $$$

Warwick's Crown Jewels.
Twenty-five cents of every tax dollar is spent on the City's health plan for its employees and retirees. That's why I call it our Crown Jewel. It's like paying the king's taxes.

This plan is NOT traditional insurance. Everybody says the plan costs $16 thousand per employee per year. That is not the way it works. There is no guaranteed cost for an employee. If a part-timer gets sick, his or her costs can be in the hundreds of thousands per year.

My background is in controlling healthcare costs. I have set up city, state, and federal programs to hold down healthcare costs. Intensive case management is the first step. Tort reform will help a lot, too. We need to examine tort reform.


Vote for Richard Langseth for Mayor of Warwick.



We are now organizing a healthcare town hall meeting. It will focus on better ways to organize and fund the City employee and School Department healthcare benefits programs. One option is the Governor's Plan. This is essentially a consolidation of city and town plans into the State healthplan. The consolidation could save millions.



There was a call for tort reform at last summer's meeting at City Hall with Representative Langevin. The crowd was very large. I had to walk from the I-95 commuter lot to make it into the City Council chamber before the doors were closed. Once in, I heard several requests for "tort reform."

In a Warwick Beacon article published on September 16, 2009, titled "Langevin says Obama speech rekindles momentum for health care reform," Representative Langevin pointed out:

"'There's more to it than competition.' On the matter of malpractice expenses and tort reform that Obama also touched on in his address, Langevin talked of a blue-ribbon panel of physicians that would review and address complaints, thereby reducing the cost of litigation."

As Representative Langevin pointed out, now is the time to consider these blue-ribbon panels. I actually served on one in Washington, addressing the best ways to measure "Quality of Care" in federal health plans. This grew into a system of quality measurements called HEDIS that I implemented at Blue Cross of Massachusetts and several HMOs. It ties right in to the concept of the blue-ribbon panels. We in Warwick should move ahead with this concept, and into the world of tort reform.


Dreamweaver CS3
My work in the area goes back to the 1980s when I filed a federal application on behalf of several Indian tribes for managed care on reservations. Since Indian people are always at risk of running out of health-benefit dollars, it made sense for them to self-manage the large healthcare claims of their workers and members.

Warwick's Crown Jewel Healthplan does not fit this model very well. Traditionally, city employees have relied on Rhode Island Blue Cross to be their advocate. Not a whole lot of thought was given to the most cost-effective and comfortable level of care for the employee or family. It was a "doctor said - doctor do" arrangement.

But the rise of the Internet is impacting healthcare in a big way. All kinds of people go into their doctor's office with printouts of their diagnoses gathered on the Web. They may have dozens of treatment protocols all printed up. Many physicians are really not equipped emotionally to handle this level of interaction. This is where the nurse caseworker or "Cooperative Claims Management" team steps in.

We need to examine what is being done now in the area of large-case management, and what improvements can be made. Our Crown Jewel Healthplan cannot be allowed to morph into a boat anchor.


IRS Seal
When you go to City Council meetings, they say that the cost per employee is $16 thousand per year. They use this number in a lot of ways, one being to recruit part-time judges and City Council members. The thought is that providing this benefit is better than paying $16 thousand per year. Here are some problems for the Green Eyeshade Crowd:

1. Since this is a self-funded program, there is no fixed cost, no premium. If a part-timer gets sick, the cost to the City can be in the hundreds of thousands. It does not actually cost $16 thousand per employee.

2. This "$16 thousand" health plan is presumed to be tax-free -- a perk. That fits into the IRS Code.

3. Here is the tricky part. Co-shares, the part employees pay, have to be reasonable by class. Say the city agrees to a 20% co-share. Using the $16 thousand number, the employee's share is $62.00 per week. What happens if that co-share eats up all of the part-timer's paycheck?

4. What happens if a part-time judge is offered the plan without a co-share, while the average employee pays a co-share? Now you may have an IRS problem. Although the judge is considered part-time, he or she could be considered highly paid. To stay within the rules, this employee should be charged the co-share. A worse case would unfold if the judge were paid as an IRS "1099" employee. Another issue comes up if the judge is not listed on the City's IRS 5500 benefits reporting form.


Dreamweaver CS3
Should we be bartering our Crown Jewel Healthcare Plan for legal and other services? Again, what are the real tax implications? This does get kind of tricky.

The classic rule of bartering is that if there is any doubt, treat the gift as income. That's why it would make far more sense to put casual part-time employees into a fully insured risk pool.